Goldman Sachs expects Indian economy to shrink by 10.3 per cent

The availability of an effective vaccine in India could allow a meaningful activity rebound in 2021 particularly in consumer-facing services sectors.

Goldman Sachs Group Inc. said it expects India’s economy to shrink 10.3% in the year to March 31, slower than the 14.8% contraction the investment bank estimated in September, as it expects the availability of a Covid vaccine to trigger a rebound in economic activity.

Goldman Sachs cautioned that the pace of recovery will be restrained by some economic scarring and a number of factors, including a weak labour market. (Reuters Photo)

Goldman Sachs also said GDP growth will rebound to 13% in the next fiscal year above consensus expectations of 10.9%.

The availability of an effective vaccine in India could allow a meaningful activity rebound in 2021 particularly in consumer-facing services sectors, where activity still remains significantly below pre-pandemic levels, it said in a November 15 note.

Goldman Sachs, however, cautioned that the pace of recovery will be restrained by some economic scarring and a number of factors, including a weak labour market, hit on private sector incomes and balance sheets, tighter credit supply conditions and limited impetus from fiscal policy.